Ekspress Group buys Delfi portals for 54 million euros
OVERVALUED? Ekspress Group owner Luik had to pay an exorbitant sum for the Delfi portals, though he insists the acquisition will pay off given Delfi's high margins and the booming Internet ad market.
TALLINN - Estonia's leading media group has announced it signed a deal to purchase a 100 percent stake in the popular Delfi news portals. The 54 million euro takeover, if approved, will create the largest Internet media holding in the Baltics and give the ambitious Ekspress Group a lucrative foothold in the rapidly developing online advertising market.
Commenting the deal, which took place on Aug. 2, Ekspress Group's majority owner Hans Luik said, "Today's large acquisition will transform Ekspress Group into a leader on the Baltic market in the most rapidly developing sphere 's Internet advertising 's and at the same time will allow us to enter the Ukrainian market."
According to details of the contract, Ekspress Group will purchase a 99.75 percent interest in Interinfo Baltic, owner of the Delfi portals, from Interinfo Holding SCA and a 0.25 percent stake from Finland's Interinfo.
The Delfi portals feature news, entertainment, personal ads and chat forums that have proven to be enormously popular among Balts. In Estonia and Latvia the sites are maintained in two languages to accommodate Russian speakers. Some 700,000 visits are made to the seven Web portals daily, the company said.
Delfi claims that its portals boast a 45 - 48 percent share of the online advertising market. Sales this year are estimated to reach 7.5 million euros, up 30 percent year-on-year.
"Also, considering Delfi's solid standing in Latvia and Lithuania, the concern [Ekspress Group] has acquired the strongest foundation for further expansion in the Baltics," said Luik, adding that the acquisition was part of the company's previously stated vow to increase exposure to the Internet advertising market.
Luik, who recently oversaw the initial public offering of the Ekspress Group, stressed that Delfi is the only true pan-Baltic media outlet in existence and that he wants to build on this success beyond the region. "In the future we do not intend to limit such a successful enterprise to countries of the eastern shore of the Baltic Sea," he said.
In the words of CEO Priit Leito, "Ekspress Group will become the Baltic states' strongest Internet company and most modern media concern. We are pleased to take on board the Delfi personnel, who are the most professional team of Internet specialists in this region."
Competitors, however, claim that Ekspress Group paid far too much for the asset. The purchase price is half of the Ekspress Group's market capitalization.
Toomas Issak, director of Eesti Meedia, Estonia's other major media group, said the price was high. "It's definitely going to strengthen Ekspress Group's positions, but I wonder if it was the wisest decision."
Issak added that Internet portals in Scandinavia that are similar to Delfi have been losing ground.
Luik defended the deal, saying that the purchase price/market cap ratio was misleading since the Ekspress Group is undervalued. He stressed that Delfi was an efficient market leader and thus deserved a high price tag.
Leito said that future sales projections show that Delfi will continue growing by 30 percent annually, while profit margins will remain extraordinarily high 's in the 35 's 40 percent range.
The group intends to borrow 80 percent 's of 43 million euros 's to finance the acquisition, said Luik, adding that three banks 's SEB Uhispank, Sampo Bank and Nordea 's have agreed to loan the money.
Magnus Sonnorp, chairman of Interinfo, praised the phenomenal success of Delfi over the past three-and-a-half years and said the Ekspress Group would boost the portals' future prospects.
Curiously, he said that Interinfo had been considering selling the news portals at an open auction near the end of 2008, but the conditions offered by the Ekspress Group convinced shareholders to opt for an early sale.
Juris Mendzins, director of Delfi in Latvia, saluted the deal. "We're very satisfied that Latvia's Delfi will for the first time become part of a media group that is engaged in print media," he said.
Delfi has two Web portals in each Baltic state and one in Ukraine (www.delfi.ua).
The Ekspress Group publishes some of Estonia's most well known newspapers and magazines, including Eesti Paevaleht, the country's third largest daily, and the free daily series under the name Linnaleht.